US President Donald Trump issued an executive order Thursday effectively banning the establishment of a central bank digital currency, in a move long supported by Congressional Republicans.
Trump's order would, he said, protect Americans from the "risks" of central bank digital currencies, or CBDCs, "which threaten the stability of the financial system, individual privacy, and the sovereignty of the United States."
This included the prohibition of "the establishment, issuance, circulation, and use of a CBDC within the jurisdiction of the United States," he added.
CBDCs, also known as "digital dollars," could in theory be issued by the Federal Reserve and be interchangeable with physical dollars, giving the US central bank control over the supply of the virtual currency, and guaranteeing its value.
Former president Joe Biden instructed the Fed to look into the creation of a CBDC, whose supporters note its potential use as a means of bringing people without bank accounts into the US financial system, and in tracing and tackling criminal activity.
But its opponents, which have long included many Republicans in Congress, have criticized CBDCs, arguing that they could threaten people's privacy, and potentially undermine the banking system by reducing people's incentives to bank privately.
The Fed has conducted research on CBDCs, but has made clear on multiple occasions that it currently has no plans to put one into circulation.
"People don't need to worry about a central bank digital currency," Fed chair Jerome Powell told the US Senate Banking Committee last year. "Nothing like that is remotely close to happening anytime soon."
Interest rates drop 'immediately'
US President Donald Trump said Thursday he would seek to bring interest rates lower by unleashing energy production, and would speak to the Federal Reserve if needed.
"I'll demand that interest rates drop immediately," he told the World Economic Forum in Davos, Switzerland, in a virtual address. "Likewise, they should be dropping all over the world. Interest rates should follow us all over."
The US Federal Reserve has a dual mandate from Congress to act independently to keep inflation and employment in check, primarily by raising and lowering the level of short-term interest rates.
As US president, Trump does not have a say over interest rate decisions, a fact that he has frequently criticized.
Trump told reporters in Washington later on Thursday that he would like to see interest rates come down "a lot," adding that lower oil prices should help them to fall.
"When the oil comes down, it'll bring down prices, he said. "Then you won't have inflation, and then the interest rates will come down."
Asked what he would do if the Fed did not lower interest rates, Trump said he would "put in a strong statement" and expected officials to listen to his views, adding that he would consider talking to Fed chair Jerome Powell if needed.
"I think I know interest rates much better than they do," he said. "And I think I know certainly much better than the one who's primarily in charge of making that decision."
"I'm guided by them very much, " he added. "But if I disagree, I will let it be known."